GBP was the worst performing major currency in the world yesterday as mounting speculation surrounding UK Chancellor Rachel Reeves’ potential departure made markets nervous about the state of Britain's debt.
Despite official denials quelling speculation later in the session, investor caution remained palpable. Yields on 30-year gilts climbed by over 20bp, as market participants positioned themselves for potential leadership change and the heightened possibility that a new chancellor could alter the government’s established fiscal stance.
ADP payrolls stateside were a big miss, with 33,000 jobs lost in June versus an expected 98,000 job additions; however, market impact was minimal with the dollar supported on the news that Trump reached a deal with Vietnam.
*Daily move - against G10 rates at 7:00 am, 03.07.25
** Indicative rates - interbank rates at 7:00 am, 03.07.25
Gilts have gained this morning after Keir Starmer told the BBC last night that Rachel Reeves will stay on as Chancellor. Yields on gilts have eased a tad this morning and GBP is mildly supported to start the day. The Swiss franc is also supported this morning following a higher-than-expected CPI print this morning.
Big day for US data today, so, once again, following the spotlight on the UK yesterday, the dollar may be back in focus. As ever, the key will be the state of play in the US job market and whether there is any cause for concern. Recent US economic indicators have painted a conflicting picture, with stronger-than-anticipated JOLTS figures followed by a disappointing ADP report. The dollar has rebounded over the last couple of days so a better than expected series of numbers could lend more support for the greenback.
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